RF's Financial News

Sunday, August 25, 2013

I absolutely believe that "the only constant is
change".Whether you're speaking of
the climate, geography, or just the "Tuesday night bowling
league" given enough time – it will change. Currently, it isn't
just the fact that things are changing that is so amazing; it's how fast things
are changing and how diverse those changes are.

To be honest, my first encounter
with Bitcoin was through my youngest son.Bitcoin (since its inception in 2009) is the poster child for global,
digital currency.Bitcoin could either
become one of the biggest, disruptive inventions of the last 200 years, or a
failed experiment costing billions.

Just so we’re all on the same page, in
2008 an anonymous person (or persons) going by the name "Satoshi
Nakamoto" laid out plans for a peer-to-peer electronic currency
system. How it works is: a series of computers (called "miners")
create units of digital currency, and add them to a ledger that is shared by
all the Bitcoin programs around the world. There is a schedule of when
and how many of these digital units get developed, and the total amount created
is never to exceed 21 million Bitcoins.

Bitcoin users can "buy"
Bitcoins (digital currency units) and use them for transactions – by "spending" them with any other
person or merchant that will accept them. So in theory (and in practice),
what we have here is an alternative currency with some interesting properties. First off (and the most serious) is that it is
completely private. There is no central
banker. There are no records showing who
owns them. There is no paper trail telling
‘big brother’ what you purchased.Thus,
the first knock against this alternative currency is that it will be used for
illegal purposes. That is usually what you'll hear as ‘main stream’ attempts
to downplay the concept and use of Bitcoin.

They are right. By being completely transaction invisible,
there are those individuals who would use them to buy illegal items. If you're a heroin dealer and you want to buy
opiates from a grower in Asia, mailing a check, or using a credit card is out
of the question. Using cash carries its
own problems such as currency conversion, and the banking regulators can
immediately look for a trail of large cash withdrawals and deposits. With
Bitcoin you can electronically transfer funds from account to global ledger to
merchant account.So yes, Bitcoins can
be used for nefarious purposes.

But the main reason why so many
Governments are scared of Bitcoin is that they can’t control it.They can't tax it. It takes the power of a central authority out
of the hands of the few and places it into the hands of the many. This scares governments to death, and rightfully
so. As far as I'm personally concerned, my fears are not based upon
anonymity, or the way it can take power away from the banking elite; moreover, I
find both of those things quite delightful. My fears have always been with: 1) Security,
2) Perceived value, and 3) How hard Governments would push back to make it
illegal and declare its use "financial terrorism".

The value of Bitcoin has been problematic,
as one would expect from a fledgling experiment of this size. The dollar value of a Bitcoin has swung
massively over the years, mostly when a security failure or a hacking took
place. In less than a year it's been as low as $13 and as high as $230. Because it isn't backed by anything, not even
a regulating body or (like with the dollar) the "full faith of the U.S.
Government" – it fluctuates based upon perceived value and demand. People
have run from it when there were numerous hacking attempts, and those same
people have embraced it in times of crisis like the Cyprus banking disaster.

My stance has always been fairly
simple. I love the idea that governments
have pushed back against the Bitcoin system. Even with this headwind, Bitcoin has forged
ahead – trying to come up with something better than the depreciating junk that
we currently carry around in our wallets. But, because it is new, fraught with mishaps,
missteps, and wild fluctuations – I haven’t been personally invested or
directly involved with it.Not to
mention the fact that I'm sure Uncle Sam would like to make even the idea of it
illegal.

But on Tuesday of this week, something
quite amazing happened. While an ever-growing
body of merchants around the world has been accepting Bitcoins as payment for
product and services, it was still considered (by most) as being a fad or a
short-term trend. Then (on Tuesday)
Germany's finance minister came out and declared that: “Bitcoin is recognized
as a unit of account".This meant
that Germany now views Bitcoin as legal tender.

By having an economy as big and as
important as Germany, recognize Bitcoin as a true unit of account (on par with
other currencies), Bitcoin has just leapt from the shadows into the limelight. This is a truly incredible development, but it
asks more questions than it answers. Will Germany come up with some way
to try and tax it? Will Germany attempt
to make disclosure of ownership a Bitcoin requirement? Will other countries open up to it, or fear
losing control of their Central banking and declare it illegal?

Something with as much potential as
Bitcoin cannot be ignored. Yet, it is
very hard to embrace as it goes through its growing pains. Hundreds of people have lost thousands of
dollars in Bitcoin exchanges that have been hacked and shut down.
Officials in high offices have declared it to be a terrorist tool. Social
scientists fear it – because if they cannot tax it, they can't promote and pay
for social services they so dearly love. And $200 price fluctuations make
it scary for conservative investors.

I do not currently own any Bitcoins.
That very well may change in the future.
Time may show us that Bitcoin is not
only real, but the first model of an even bigger concept where the
decentralization of money becomes the global goal. I don't know. But from its inception and 5 years later have Germany
embrace it as legal tender is certainly reason enough to stand up and take
notice.This could ‘literally’ change
everything!

The Market...

A while back The Ben Bernanke scared everyone into believing
that he's going to begin tapering off the QE gas pedal in September. That sent the market into a tizzy, and we fell
700 points over a couple weeks. Then, because of the market's fall,
some of those that were saying that the taper was indeed coming, have changed
their minds, while others began to say that the market wouldn't care if they do
because it's all "priced in".

If you equate the DOW 15,600 level to the $85B per month that
the Fed is pumping into the system – then if the Fed cuts back to $60B – the
appropriate DOW level would be approximately 14,650.Therefore, for each $20B the Fed stops
spending, you can subtract approximately 1,000 DOW points.This is a very rough estimate, but one that
actually makes a bit of sense.

I can make the case for both sides of the ‘taper’ argument, and
right this moment I'm still slightly on the side that says that they won't
taper in September. Despite the fact that I know QE hasn't solved
the economy (and the Feds know it too), they also know that QE keeps the market
buoyant and thus creates the "wealth effect". Is the Fed
willing to reduce that? In the short term – maybe, but in the longer
term, ONLY Fed money can keep this market up because the economy
cannot. Factually:

-New home sales plunged 13% this
month (a huge drop).

-Mortgage applications have
fallen so much that banks are laying off mortgage application personnel.

-Middle class consumer retailers
– from Wal-Mart to J.C. Penny to Macy’s tell us that the middle class is broke.

-Only 47% of Americans have a
full time job – the rest are part-time.

-The 2nd largest
employer in the U.S. is a Temp Agency!

-Obamacare is another huge
expense hitting business and the consumer. After lying about its affordability, virtually
every state has declared that health insurance costs will rise dramatically in
the New Year.

The economy is weak and going to get weaker. If the FED removes money from the system, the
market will go lower. But in the here
and now, it looks like the market has decided that it’s time for a
bounce. After hitting bottom on Wednesday, we've bounced for
two sessions, regaining the 50-day moving average on the S&P and reclaiming
15k on the DOW. The DOW transports (which
have led virtually all the market moves) have turned up. So there's a decent
amount of evidence to say we're going higher for a while.

I think we can lean long for a few days considering that we
won't get the word about tapering until September 18. Between now and then we could see them pile on
another few hundred points. I don't for a moment think you can throw
caution to the wind and get crazy, but small positions with a decent stop
should be okay. As we approach September
18th we'll want to be more cautious again.

Tips:

A
lot has been written in the past weeks about the moves in precious metals.Gold, silver and the miners have indeed done
very well.Some “rumors behind the
news”:

-The government has gone to war against J.P.
Morgan – not directly against it’s silver manipulation (which at times was 1/3
of the total world market) – but enough that it is forcing JPM to clean up it’s
act all over the bank.How long this
scrutiny will last is anyone’s guess at this point.

-It’s tough to say whether silver or gold are
leading the market – but on a percentage basis – the winner (thus far) is
clearly silver.

-With the physical metal (or lack of it)
actually becoming involved in the ‘paper’ pricing mechanism (and we all knew
‘eventually’ that time would come), ‘paper pricing’ has been replaced by
‘physical pricing’.

-Currently – between Goldman, JPM, Gartman, Bo
Polny, Nenner and others net long on the precious metals trade – don’t fight
the Fed / or the major investment houses!

My
currentshort-term holds are:

-FB – in at 25.61 (currently 40.65) - stop at 38.00,

-FCX – in at 28.47 (currently 31.76) – stop at
30.50,

-SIL – in at 24.51 (currently 16.62) – no stop

-GLD (ETF for Gold) – in at 158.28, (currently
135.00) – no stop ($1,395.70 per physical ounce), AND

Expressed
thoughts proffered within the BARRONS REPORT, a Private and free weekly
economic newsletter, are those of noted entrepreneur, professor and author, RF
Culbertson, contributing sources and those he interviews. You can learn more and get your free
subscription by visiting: <http://rfcfinancialnews.blogspot.com> .

Please
write to <rfc@culbertsons.com> to inform me of any
reproductions, including when and where copy will be reproduced. You may use in
complete form or, if quoting in brief, reference <rfcfinancialnews.blogspot.com>.

If
you'd like to view RF's actual stock trades - and see more of my thoughts -
please feel free to sign up as a Twitter follower - "taylorpamm" is my handle.

If
you'd like to see RF in action - teaching people about investing - please feel
free to view the TED talk that he gave on Fearless Investing:http://www.youtube.com/watch?v=K2Z9I_6ciH0

To
unsubscribe please refer to the bottom of the email.

Views
expressed are provided for information purposes only and should not be
construed in any way as an offer, an endorsement, or inducement to invest and
is not in any way a testimony of, or associated with Mr. Culbertson's other firms
or associations. Mr.
Culbertson and related parties are not registered and licensed brokers. This message may contain information
that is confidential or privileged and is intended only for the individual or
entity named above and does not constitute an offer for or advice about any
alternative investment product. Such advice can only be made when accompanied
by a prospectus or similar offering document. Past performance is not indicative of
future performance. Please make sure to review important disclosures at the end
of each article.

Note:
Joining BARRONS REPORT is not an offering for any investment. It represents
only the opinions of RF Culbertson and Associates.

PAST
RESULTS ARE NOT INDICATIVE OF FUTURE RESULTS. THERE IS RISK OF LOSS AS WELL AS
THE OPPORTUNITY FOR GAIN WHEN INVESTING IN MANAGED FUNDS. WHEN CONSIDERING
ALTERNATIVE INVESTMENTS (INCLUDING HEDGE FUNDS) AN INVESTOR SHOULD CONSIDER
VARIOUS RISKS INCLUDING THE FACT THAT SOME PRODUCTS AND OTHER SPECULATIVE
INVESTMENT PRACTICES MAY INCREASE RISK OF INVESTMENT LOSS; MAY NOT BE SUBJECT
TO THE SAME REGULATORY REQUIREMENTS AS MUTUAL FUNDS, OFTEN CHARGE HIGH FEES,
AND IN MANY CASES THE UNDERLYING INVESTMENTS ARE NOT TRANSPARENT AND ARE KNOWN
ONLY TO THE INVESTMENT MANAGER.

Alternative
investment performance can be volatile. An investor could lose all or a
substantial amount of his or her investment. Often, alternative investment fund
and account managers have total trading authority over their funds or accounts;
the use of a single advisor applying generally similar trading programs could
mean lack of diversification and, consequently, higher risk. There is often no
secondary market for an investor's interest in alternative investments, and
none is expected to develop.

All
material presented herein is believed to be reliable but we cannot attest to
its accuracy. Opinions expressed in these reports may change without prior
notice. Culbertson and/or the staff may or may not have investments in any
funds cited above.

Remember the Blog: <http://rfcfinancialnews.blogspot.com/>
Until next week – be safe.

Sunday, August 18, 2013

This week – without a fanfare and
without the NY Times or the WSJ carrying the news blurb – the US Government
came out with a landmark study. The US
Government found that in shale oil drilling areas, fracking fluid does NOT
disrupt the water table. This is a major
defeat to the EPA that has fought tooth-n-nail to stop fracking operations
because they claimed that it contaminated the water supply with natural
gas. With the Obama administration being so completely on board with the environmental
hard-liners this was an important finding. Why? There is an abundance of pressure on the Obama
administration to slow down all of the fracking operations going on around the
country. The incredible amounts of natural
gas that we’ve discovered, and are now exporting – means that (for the first
time) the U.S. is providing energy to others (around the globe) for profit.

America was built on cheap energy. The ONLY reason we built our vast rolling urban
developments far away from cities was because land and gasoline were cheap
– and people didn't mind driving. That's
what put millions of carpenters and craftsmen to work at the end of WWII – on
housing, malls, and highways. Cheap
energy allowed that to happen.

I think the ONLY way we can truly
save the American economy is if they cut all the red tape, do away with the
over zealous environmental regulations, and allow us to produce enough oil and
gas that we get back to $1.50 a gallon gasoline. If they did that, it is
my guess that the building/manufacturing boom would be so big it would surprise
even me. So, is this the start of it? Honestly – probably not.

I personally would love to see us go
‘full speed ahead’ with drilling, refining and gas capture. But there are just so many regulations to get
through now a days. For example – here’s
a true story that someone sent to me:

-Last
month a Missouri man who makes a living as a magician had quite the story to
tell. Because he has a pet rabbit he
"pulls from the hat", the USDA contacted him about obtaining a USDA
rabbit license because he uses the rabbit in the business.

-In his
correspondence he wrote:“I just
received an 8 page letter from the USDA, telling me that by July 29, I need to
have in place a written disaster plan, detailing all the steps I would take to
help get my rabbit through a disaster, such as a tornado, fire, flood, etc.
They not only want to know how I will protect my rabbit during a disaster, but
also what I will do after the disaster, to make sure my rabbit gets cared for
properly. I am not kidding-before the end of July I need to have this
written rabbit disaster plan in place, or I am breaking the law.

-This
ended up being a 41-page document outlining the entire contingency plan that he
would follow if a disaster struck. This is the type of garbage our
Government considers "normal" activity, and is making it more
difficult for this gentleman to earn a
living.

My fear is that the ‘insane’ is the
new normal. Everywhere I look the push
is for more rules, more regulations, and more Government intrusions. I'm
just hopeful that their latest look into fracking and finding it not nearly as
dangerous as was originally thought – could provide a light at the end of a
tunnel.

On a related note – I am a firm
believer in some sort of renewable energy.
I love solar energy but the storage of that energy is a real issue. Batteries don't work that well, and other storage
mechanisms also have issues. Therefore,
solar really isn’t a viable option until they solve the storage issue. But recently some scientists in Colorado have
come up with a solution that solves the problem differently. Instead of batteries and panels, they
considered a different ‘attack’. They focus
mirrors onto a tall cylinder filled with water. This causes the water inside the cylinder to
become extremely hot. A catalyst metal
is then introduced that causes the hydrogen (in water) to split from the oxygen.
They then bottle the hydrogen and store
it in a ‘tank.’ There are no nasty
by-products, and it’s completely ‘clean’ energy. They are using solar power to split hydrogen
from water – and then using the hydrogen to power our electricity generation
facilities.

My point to all of this is that we
live in a country full of natural resources and a lot of smart people. As much as we talk ‘doom and gloom’ of our
economic system, the fact is that even if it fails completely (which is likely),
something WILL rise from the ashes. Cheap, abundant energy is one element that
puts a lot of people back to work in a hurry. A solution on how to harness the sun’s power –
sets us up for generations to come.
Let’s keep our fingers crossed.

The Market:

This week we entered the land of ‘chop’.
With some form of S&P support at the
1650 area, we have worked our way down there and bounced around. And when I say bounced around, an average day
would have the market opening green, dipping red, going green, falling 140 points,
and then reversing itself to close up 30. That's one heck of a round trip.

So why the chop? The taper talk is paramount, but there's also
those 6 Hindenburg Omens that the market has flashed. Then there are the ‘less than stellar’
economic reports that we keep getting. Put this all together, and there are a lot of
serious headwinds to contend with.

But everyday I have to listen to
CNBC tell how great companies are doing, how great the consumer is, and how
manufacturing is doing so well. Yet this
week:

- Both
Macy’s and Wal-Mart missed their earnings and guided lower saying the consumer
is tight.

-Cree (the
largest maker of LED lighting) missed their earnings number, and said that
sales are really slumping.

How can the Fed taper off the gas
pedal when it's obvious that after 5 years of all this money printing, stimulus
and bail outs – we’re just barely above stall speed. The market has every right to be a bit edgy. Some will say that we are just consolidating
and ‘digesting’ the fact that tapering is coming. Really?
I'm NOT in the camp that says the Fed can yank $15 Billion a month from
their buying without causing harm. Logically, if the market is up at these levels
because of $85 Billion a month in Fed purchasing, doesn't it make sense it will
fall to the level that equates with $70 Billion if they taper?

In any event, until the market
either breaks out above 1709 or breaks below 1650 we are sitting tight. I think the best play is fast small trades,
not "jumping in" with both feet. On another note, gold and silver
have both done very well in the past few days and (of course) TV isn't talking
about that. But let's face it, gold has
outperformed the market since June, and there are a lot of reasons for that. I’ve been a ‘gold bug’ for 12 years now and I
feel that there's more to come. The reasons we pounded the table for gold
in 2001 have not changed. I have stated
that gold has a date with $2,400 – and silver a date with $70, and I'm standing
on that.

In stock land, I'm a bit hesitant on
doing much until S&P 1650 and 1709 either hold up or break down. Over 1709 it would look like we should buy
more, under 1650 we could be in for more pain.
On the precious metals front, I think we could see one small shake down,
but all in all, the overall direction is up and buying the metals makes sense.
Likewise the miners who have been beaten to a pulp have really done well
recently. Back at the end of June I mentioned that picking up a basket of the
highest ranked miners made a lot of sense – and congrats to whoever made that
trade.

Tips:

This week I was stopped out flat on
CAT and CCK. But look at the movement in
the metals – silver and gold. There are
rumors that there were ‘failed deliveries’ of some of the physical metals this
week, and deliveries that used to come in 3 weeks are now stretching over 8 and
9 weeks. Remember 6 weeks ago when
silver was selling for $18+? It’s now
over $23 an ounce. Congrats to the
buyers out there! Also – the miners are
beginning to get a lot of interest. This
sector (in particular) has been beaten beyond belief – so it won’t take much to
have some tremendous moves in a hurry.
You may want to buy into the junior miner ETF – just for good measure!

Also – I’m seeing SSYS (a 3D
printing company) offering a fairly good opportunity to make 5% in a
month. The stock is selling for $99 /
share, and you can sell the ‘covered call’ against it – Sept 21 - $100’s for
around $5.10. Now SSYS has been on a
tear as of late – so you have a high probability of getting ‘stopped out’ – but
you’re still making over 5% in one month, and you’re in a very fast-growing
space.

My
currentshort-term holds are:

-FB – in at 25.61 (currently 37) - stop at 36.00,

-FCX – in at 28.47 (currently 31.52) – stop at
30.50,

-SIL – in at 24.51 (currently 15.82) – no stop

-GLD (ETF for Gold) – in at 158.28, (currently
132.88) – no stop ($1,371.70 per physical ounce), AND

Expressed
thoughts proffered within the BARRONS REPORT, a Private and free weekly
economic newsletter, are those of noted entrepreneur, professor and author, RF
Culbertson, contributing sources and those he interviews. You can learn more and get your free
subscription by visiting: <http://rfcfinancialnews.blogspot.com> .

Please
write to <rfc@culbertsons.com> to inform me of any
reproductions, including when and where copy will be reproduced. You may use in
complete form or, if quoting in brief, reference <rfcfinancialnews.blogspot.com>.

If
you'd like to view RF's actual stock trades - and see more of my thoughts -
please feel free to sign up as a Twitter follower - "taylorpamm" is my handle.

If
you'd like to see RF in action - teaching people about investing - please feel
free to view the TED talk that he gave on Fearless Investing:http://www.youtube.com/watch?v=K2Z9I_6ciH0

To
unsubscribe please refer to the bottom of the email.

Views
expressed are provided for information purposes only and should not be
construed in any way as an offer, an endorsement, or inducement to invest and
is not in any way a testimony of, or associated with Mr. Culbertson's other
firms or associations. Mr.
Culbertson and related parties are not registered and licensed brokers. This message may contain information
that is confidential or privileged and is intended only for the individual or
entity named above and does not constitute an offer for or advice about any
alternative investment product. Such advice can only be made when accompanied
by a prospectus or similar offering document. Past performance is not indicative of
future performance. Please make sure to review important disclosures at the end
of each article.

Note:
Joining BARRONS REPORT is not an offering for any investment. It represents
only the opinions of RF Culbertson and Associates.

PAST
RESULTS ARE NOT INDICATIVE OF FUTURE RESULTS. THERE IS RISK OF LOSS AS WELL AS
THE OPPORTUNITY FOR GAIN WHEN INVESTING IN MANAGED FUNDS. WHEN CONSIDERING
ALTERNATIVE INVESTMENTS (INCLUDING HEDGE FUNDS) AN INVESTOR SHOULD CONSIDER
VARIOUS RISKS INCLUDING THE FACT THAT SOME PRODUCTS AND OTHER SPECULATIVE
INVESTMENT PRACTICES MAY INCREASE RISK OF INVESTMENT LOSS; MAY NOT BE SUBJECT
TO THE SAME REGULATORY REQUIREMENTS AS MUTUAL FUNDS, OFTEN CHARGE HIGH FEES,
AND IN MANY CASES THE UNDERLYING INVESTMENTS ARE NOT TRANSPARENT AND ARE KNOWN
ONLY TO THE INVESTMENT MANAGER.

Alternative
investment performance can be volatile. An investor could lose all or a
substantial amount of his or her investment. Often, alternative investment fund
and account managers have total trading authority over their funds or accounts;
the use of a single advisor applying generally similar trading programs could
mean lack of diversification and, consequently, higher risk. There is often no
secondary market for an investor's interest in alternative investments, and
none is expected to develop.

All
material presented herein is believed to be reliable but we cannot attest to
its accuracy. Opinions expressed in these reports may change without prior
notice. Culbertson and/or the staff may or may not have investments in any
funds cited above.

Remember the Blog: <http://rfcfinancialnews.blogspot.com/>
Until next week – be safe.

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